Nigeria’s power sector: The way forward (part four)

This is the fourth part of my concluding articles and the 25th in my series of articles on the power sector. The third, published last week, was about the need for accelerated development of natural gas for fuelling the power sector. The present article is advocating for an ambitious investment in grid expansion. Power distribution and transmission are the weak links in the Nigerian Electricity Supply Industry. Power distribution, primarily because the three tiers of government have so far not seen the need to divest their 40 percent equity in the partially privatised eleven power distribution companies (DisCos), and the absence of cost-reflective tariffs, which have created serious cash flow challenges for the DisCos; hence, they are unable to raise long-term funds from the capital market to invest in the building of a robust distribution infrastructure, as well as mobilise sufficient short-term funds from the money market for their cash flow needs. Power transmission is the real big elephant in the room when it comes to the decades-long perennial power crisis in Nigeria, and until strategies to dramatically expand investment in infrastructure upgrades are put in place and realised, very little will change as far as public power supply in Nigeria is concerned.

Read also: Nigeria’s power sector: The way forward (part one)

I have done a number of articles on the erstwhile Transmission Company of Nigeria (TCN) in my series on the power sector, signifying the importance of power transmission to the Nigerian power sector and the Nigerian economy. Both the National Integrated Electricity Policy (NIEP 2025) and the Nigeria Integrated Resource Plan (NIRP), two key policy instruments of the Federal Ministry of Power (MoP), give significant highlights to the challenges of power transmission in Nigeria and the plan to turn them around.

According to the NIEP, “TCN manages a grid spanning nearly 18,000 kilometres of high-voltage transmission (330 kV and 132 kV) lines, taking power from the about 29 generating stations through over 200 330/132 kV and 132/33 kV transmission substations to DisCos, directly connected customers, and international customers… However, critical areas of deficiency remain; for example, most of the Northwest and the entire Northeast are served by radial single-circuit transmission lines, meaning that any outage on these lines would leave the entire region without service. Despite extensive capacity expansion over the years, the national transmission network is still severely constrained by equipment obsolescence and a relatively high technical loss level of 7 percent to 9 percent.”

The NIRP specifically focuses on expanding the power transmission network as a key strategy to bridging the power supply gap and meeting national demand for electricity. Northern Nigeria, comprising the three Northern geopolitical zones, is where the largest power transmission deficit is. The NIEP 2025 corroborates this, noting that critical areas of deficiency remain, as most of the Northwest and the entire Northeast are served by radial single-circuit transmission lines, meaning that any outage on these lines would leave the entire region without service. The NIRP recommends optimal operation of the national power system to ensure strong North-South transmission interconnectors. This stands in contrast to the emphasis in the current transmission investments, which are more focused on East-West inter-zonal connectors. It also emphasises the urgent need to complete the TCN Transmission Master Plan.

 “The NIRP specifically focuses on expanding the power transmission network as a key strategy to bridging the power supply gap and meeting national demand for electricity.”

The National Integrated Electricity Policy (NIEP 2025) and the Electricity Act 2023 require the unbundling of TCN, which took effect on April 8, 2025, when the National Independent System Operator (NISO) was inaugurated to take care of system operations and transmission network issues and the Transmission Service Provider (TSP) to take care of the physical infrastructure or transmission backbone.

Read also: Nigeria’s power sector: The way forward (Part 2)

The Federal Government envisages the public power supply, which is currently 5,500 megawatts (MW), to expand to 8,500 MW. To achieve this, the NIEP provides for electricity transmission to be “opened for private investment by licensing Independent Electricity Transmission Network (IETN) operators to build, operate, and own electricity transmission networks at 132 kV and 330 kV levels.” The question is how realistic is this with the current reluctance to full privatisation of power assets owned by the three tiers of government and the absence of a sufficiently enabling environment for private sector investment in the power sector? The Nigerian power sector has witnessed a drought of foreign direct investment (FDI) for well over a decade or two decades. The only episodic investments we notice in new power generation plants are largely by Nigerian or existing investors who won assets during the 2014 power sector privatisation exercise.

As part of its ambitious green energy plan, China is investing 445 billion USD in grid infrastructure between 2020 and 2025 alone, which is a thumbs-up for a communist government with a very pragmatic mixed economy policy framework. Nigeria needs tens of billions of USD to achieve its national power grid expansion program, which should be a realisable ambition for potentially the biggest economy in Africa. But those billions will not come simply by writing it as a policy statement in the National Integrated Electricity Plan or by a technocrat like the Director General of the Bureau of Public Enterprises giving a ‘charge’ by fiat for the wheeling capacity of the Nigerian power grid to increase from 5,550 MW in 2025 to 8,500 MW in eighteen months, or by the end of 2027. Indeed, it is not 8500 MW that Nigeria needs by the end of 2025 but 50,000 to 60,000 MW, as recently suggested by Mr. Aliko Dangote—or even more.

What Mr. Bayo Ojulari said in his recent Bloomberg interview comes very handy: “But what we want to do is move away from government domination of private sector businesses. We want the private sector to have freedom, and that is what the government has been doing.” This must reflect in a mindset shift by politicians and technocrats in the power sector. Without instituting a transparent, unequivocal, and ambitious ease of doing business policy framework in the power sector that creates a very welcoming environment for private sector investors, the licensing of Independent Electricity Transmission Network (IETN) operators to build, operate, and own electricity transmission networks might not yield the expected results.

Read also: Nigeria’s power sector: The way forward (Part three)

The most powerful resource for turning around the national power grid under the recently inaugurated Transmission Service Provider (TSP) is not hundreds of billions of public sector USD but the right market-friendly policy framework that will bring in the required tens of billions of USD within a relatively short time to upgrade our national grid to carry tens of thousands of megawatts for a country with a newly industrialised economy aspiration.

 

Mr. Igbinoba is Team Lead/CEO at ProServe Options Consulting, Lagos.